1. Global Economy (International Business) n Importance to DFW Area n Why TXU Went International n How TXU Decided Where to Enter (the Strategy) n What TXU Has Learned in Order to Be Successful (the Execution)

2. Global Economy Importance to DFW Area n Foreign trade in DFW totaled over $23 Billion in 1999, up from $16 Billion in 1997. n Nine Fortune Global 500 companies (and 10 additional Fortune 500 companies) are headquartered in DFW. DFW was ranked number one for international corporate location (by AA in 1997). n The number of foreign destinations served out of DFW Airport has more than doubled from 1990 to today. International air service yields $2.3 Billion to the local economy. This is expected to double by 2005. n Wholesale and retail trade is the second largest employment sector in Dallas, with 24% of the jobs. n If DFW were a country, we’d rank 24th in the world economy.

3. Why TXU Went International n A way to diversify our market risk (financial & operational) n A way to learn “hands on” about deregulated energy markets n Leverage TXU management and technical expertise related to energy business (economies of scale and operational synergies) n Opportunity for growth and adding to shareholder value given international market deregulation compared to US

4. Global Business Drivers For Other Industries n Global Products -- Leverage Brand n Joint Resources -- Move Work to Other Countries n Rationalized/Flexible Operations -- Production Capabilities n Suppliers -- Economies of Scale and Delivery or Scarcity n Corporate Customers -- Are They Global?

5. 100% 1994 TXU Transformation of Assets (From Texas Only) Total - $24.2 Billion

6. Resulting from Successful Strategic Acquisitions 2000 6% 44% 7% 36% TXU Transformation of Assets (From Texas Only) US Electric$15.2 Billion US Gas 2.4 Billion US Energy 2.4 Billion Europe 12.4 Billion Australia 2.0 Billion TOTAL$34.4 Billion

7. Millions of Dollars $0 $5,000 $10,000 $15,000 $20,000 $25,000 199519961997199819992000 14,736 17,118 7,946 US Electric US Gas US Energy EuropeCommunications/Other Australia 22,009 TXU Operating Revenues 12 Months Ended 6,551 5,639

8. How TXU Decided Where To Enter (The Strategy) n Stable economies and currencies n Growth potential n Rational government, regulatory and legal structure n Limited barriers to competition and foreign investment n Financial returns that are compelling (a good deal)

9. Gas Supply Power Generation Contracts Upstream Portfolio Optimization Downstream Merchant Trading & Portfolio Management Residential & Small Business Commercial & Industrial Wholesale & Alliances Strategy: TXU will achieve excellent operations of significant scale in selected regions, which optimize a portfolio of assets, capabilities and customer relationships across multiple products and services. Merchant Energy Model

16. Portfolios Global Management Processes Australia Central Europe Nordic Northeast Texas Midwest Others Global Portfolio Processes UK Functional Processes Support Processes Support Processes Driven by the needs of the GEM business Support Processes n Transactional –scale, standardisation n Require specialized or specific knowledge n Examples - HR payroll, IT service

17. Critical Success Factors for International Business Operation n Dealing in different languages n Dealing in same language, but with different semantics n Dealing with different business cultures/practices n Dealing with different social cultures n Maintaining favorable laws/regulations n Currency management n Country infrastructure (communications, work force skills, …) n Managing time differences and travel

18. Keys to Implementation n Don’t assume anything n Have company “IT” infrastructure in place to support communication and management control n Make effective use of business partners/alliances n Make sure “all” cultures are represented in the management team and staff

19. Global Business Success n Same problem as domestic -- just different scale and more barriers